Throughout the 20th century, the
U.S. electric power delivery infrastructure served our nation well, providing
adequate, affordable energy to homes, businesses and factories. This once
state-of-the-art system brought a level of prosperity to the United States
unmatched by any other nation in the world. But a 21st-century U.S. economy
cannot be built on a 20th-century electric grid.

As the U.S. economy has grown and evolved,
electricity’s role as an enabler of economic productivity has become ever more
important. The transmission and distribution network forms the critical link
between electricity generation and consumers. However, the technological
sophistication of the electricity grid has not kept pace with the growing
demand for high-quality, high-value services to end-users. The current grid in
United States relies on outmoded
technology – much of which dates from as far back as the 1930s – that causes
transmission congestion and makes the grid unreliable and inefficient. It also
requires an inefficient number of power plants to meet periods of peak demand,
some used as little as a few hours per year.

As we move further into the
digital age of the 21st century, the U.S. and rest of the world
are becoming increasingly dependent upon electric power. In addition to the
quantity of power consumed, the quality and reliability of power are
becoming increasingly critical. As the stress on the grid increases, so does
the economic impact of blackouts and power interruptions; it has been
estimated that failures grid cost the American economy in excess of $100
billion per year.

Using smart technologies to
spread power use more evenly and cut demand during peak times of the day
will lower costs by reducing the need for power from the most expensive
sources. A host of new smart energy devices and systems are emerging that
can take pressure off overloaded grid infrastructure and power costs,
dramatically improve grid reliability and security, and accelerate the
growth of cleaner power generation.

“Smart energy” is the
application of digital information technology to optimize the electrical
power system. Smart energy technologies are beginning to transform the power
network into a smart grid capable of meeting 21st century
economic, security and environmental challenges.

The “smart grid” is the product
of applying smart energy technology to electrical power delivery and
generation. A smart grid incorporates elements of traditional and
cutting-edge power engineering, sophisticated sensing and monitoring
technology, information technology, and communications to provide better
grid performance and to support a wide array of additional services to
consumers. A smart grid is not defined by what technologies it incorporates,
but rather by what it can do, including key attributes such as the
following:

The grid will be
“self-healing.” Sophisticated grid monitors and controls will
anticipate and instantly respond to system problems in order to avoid
or mitigate power outages and power quality problems.

The grid will be more
secure from physical and cyber threats. Deployment of new technology
will allow better identification and response to manmade or natural
disruptions.

The grid will support
widespread use of distributed generation. Standardized power and
communications interfaces will allow customers to interconnect fuel
cells, renewable generation, and other distributed generation on a
simple “plug and play” basis.

The grid will enable
consumers to better control the appliances and equipment in their
homes and businesses. The grid will interconnect with energy
management systems in smart buildings to enable customers to manage
their energy use and reduce their energy costs.

The grid will achieve
greater throughput, thus lowering power costs. Grid upgrades that
increase the throughput of the transmission grid and optimize power
flows will reduce waste and maximize use of the lowest-cost generation
resources. Better harmonization of the distribution and local load
servicing functions with interregional energy flows and transmission
traffic will also improve utilization of the existing system assets.

The potential benefits of an
enhanced power delivery system are enormous. An upgraded grid can support
the provision of important new services to consumers, including better
ability to manage energy use and energy costs, and better support for use of
distributed generation. Studies of potential benefits suggest that
transformation of the power grid over the next 20 years could result in
substantial increases in productivity and GDP growth, reduced carbon
emission, and increased national security.

Enhanced grid operation will
give customers access to less expensive power sources. The smart grid will
increase throughput on existing lines by providing more effective power flow
control. This increased line capacity reduces congestion (which requires
more expensive units to run instead of lower-cost units) and thereby lowers
generation costs to consumers. The ability to increase grid throughput (and
the ability to support widespread distributed generation) also relieves
pressure to site and build long-line transmission lines, thus avoiding the
environmental and aesthetic problems caused by such projects.

Present
Activities

There are presently several
efforts under way to articulate the architecture and needs of a smart grid.
Other efforts are taking initial steps toward testing and implementation in
selected regions. These efforts help to point out both the promises and
challenges of a smart grid. Some of these are described below:

NETL Modern Grid
Initiative

The National Energy Technology Laboratory’s
Modern Grid Initiative (MGI) seeks to accelerate the modernization of our
nation’s electricity grid. To accomplish this, MGI is fostering the
development of a common, national vision among grid stakeholders. The
initiative is also working toward a framework that enables utilities,
vendors, consumers, researchers and other stakeholders to form partnerships
and overcome barriers. MGI also supports demonstrations of systems of key
technologies that can serve as the foundation for an integrated, modern
power grid.

The intent of the Modern Grid
Initiative is to accelerate the nation’s move to a modern electric grid by
creating a flagship partnership between industry and DOE that invests
significant funds in demonstration projects. Projects to demonstrate
advanced technologies will establish the value and feasibility of developing
an integrated suite of technologies and processes that move the grid toward
modernization. It is envisioned that this program will consist of 10–15
projects carried out over five years. These will ultimately produce a set of
modern grid design specifications for the nation. They will also support the
creation of standards and guidelines for the utilities, consumers, vendors,
regulators, researchers and trade associations that make up the electric
grid industry.

NETL asserts that much work
remains to be done to achieve this longer-term vision. The integration of
existing technologies, the development of new ones and integrated testing to
show their benefits are all needed. Regulatory and legislative reform to
modify regulations and statutes that are inconsistent with this vision is
also needed. New standards must be developed and some existing standards
will require changes. Various process issues must be resolved. We also need
metrics to provide the milestones for measuring our progress towards this
vision. And, importantly, the totality of societal benefits must be included
in the calculus of Modern Grid investments to provide the financial
incentive needed to move us forward.

GridWise™ Action
Plan

In 2004, the GridWise™ Alliance
and the U.S. Department of Energy’s (DOE’s) Office of Electric Transmission
and Distribution jointly expressed their intention to establish a reliable
and efficient electric system that will (1) utilize information technologies
to revolutionize energy systems as they have revolutionized other aspects of
U.S. business, (2) create value for all participants by developing and
deploying technology solutions that cross enterprise and regulatory
boundaries, (3) enhance security and reliability through an information-rich
power grid that is flexible and adaptive, and (4) empower consumers to
benefit from their participation in the operation of the power grid.

As the core of this joint action
plan, the GridWise Alliance proposes to address three main overarching
challenges facing the industry: (1) Develop and deploy an innovative suite
of technologies to realize the benefits of a transformed grid. (2)
Reinvent the industry infrastructure to support innovation. (3)
Build and communicate the vision and value to catalyze transformation.

San Diego Smart Grid Study

The San Diego Smart Grid Study
was commissioned by the Energy Policy Initiatives Center (EPIC) at the
University of San Diego, and co-sponsored by the Utility Consumer Action Network (UCAN) and San
Diego Gas & Electric (SDG&E). This study was one of the first to examine a
“smart grid” strategy for a region and to demonstrate adequate benefits to
justify modernization.

Applying the concepts of the
NETL Modern Grid Initiative, the study brought forth three key findings: (1)
Economic, technological, and regulatory trends in the San Diego region will
create a desirable climate for implementation of a Smart Grid. (2)
Twenty-six technologies could be implemented to advance the current electric
grid toward a smarter, more modern system. (3) A preliminary
cost-benefit analysis suggests that Smart Grid benefits adequately exceed
the initial installation costs and cover the ongoing operation and
maintenance costs.

In examining the economics of a
Smart Grid, the study revealed that making a business case has less to do
with the cost of technologies and integration, and more to do with what is
within a rate case. In particular, if only system benefits such as reduced
peak demand are included, the payback is lang. But if societal benefits such
as reduced business losses due to outages and power quality issues were
included in the business case, it becomes much more compelling, Hence, as
long as regulators look only for short-term benefits – and only benefits to
the system itself—the industry will not be allowed to justify long-term
capital improvements with long-term societal benefits.

IEA Electricity
Networks Analysis Research and Development (ENARD)

In 2006, the International
Energy Agency (IEA) formed the Implementing Agreement programme on
Electricity Networks Analysis Research and Development (ENARD) to address
issues involved in the development, design, operation and performance of
electricity networks at the integrated system level. ENARD’s vision is to
facilitate the uptake of new operating procedures, architectures,
methodologies and technologies in electricity T&D networks that can enhance
their overall performance in relation to the developing challenges of
network renewal, renewables integration and network resilience.

The development and integration
of active network management measures, control and automation have all
emerged as key priorities for tomorrow’s networks; the present ageing
infrastructure provides the opportunity to adopt such measures as part of
overall network renewal strategies. ENARD’s workshop on Distributed
Generation (DG) System Integration, held in Vienna, March 2007, succeeded in
establishing the basis for a proposed new Annex in this area. The increased
penetration of distributed generation and the consequential requirement to
accommodate, and preferably to integrate, such smaller and distributed power
sources within the network clearly presents a whole series of challenges to
the distribution engineer. This will undoubtedly require a transition from
today’s passive distribution networks to future active networks in which
advanced automation and control measurements will contribute increasingly to
network performance and to realizing the potential of distributed generation
in terms of system support and network development. Key enabling
technologies to advance such developments would include energy storage,
demand-side management, dynamic operation of electrical plant, FACTS,
current limiters and solid state substations.

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Anderson, Roger N.,
Columbia University, "The Distributed Storage-Generation “Smart” Electric
Grid of the Future," from workshop
proceedings, “The 10-50 Solution: Technologies and Policies for a Low-Carbon
Future.” The PewCenter on Global Climate Change
and the National Commission on Energy Policy
http://www.pewclimate.org/docUploads/10-50_Anderson_120604_120713.pdf

The present U.S. electric grid will not
work on any scale—local, state, national or international—at the higher
loads and more diverse generation sources required in the future. In order
to be able to utilize massive amounts of renewable energy sources, it is
necessary to first modernize the grid by installing digital controls,
electronic switches, and higher capacity transmission lines

The Energy Future Coalition,
in partnership with the Center for American Progress and later the Energy
Foundation, began a series of listening sessions with a wide range of
stakeholder groups to determine where the areas of agreement and
disagreement were. We found remarkably broad support for a new network of
extra high-voltage lines (345 kilovolts or above) to bring high-quality
renewable energy resources – wind in the Great Plains, solar in the desert
Southwest – to market. The group agreed that a national Clean Energy Smart
Grid is an economic, environmental, and national security imperative – vital
to renewing America’s economic growth, strengthening national security, and
addressing the threat of global climate change. This testimony describes
some of the benefits and policies that are needed.

The
IntelliGrid Consortium is a collaboration of utility, manufacturers,
researchers, and government leaders, all working together to make the
intelligent, self-healing power system of the future a reality. In 2004,
EPRI took a major step toward facilitating such integration with the
publication of the IntelliGrid℠ Architecture — the first
comprehensive technical framework for linking communications and electricity
into a “smart grid” that will offer the unprecedented flexibility and
functionality required by an increasingly digital society. To create the
IntelliGrid℠ Architecture, EPRI brought together a consortium of
diverse industry stakeholder, including utilities, equipment manufacturers,
and government agencies. With input from these stakeholders, a team of
experts developed the standards and guidelines needed to provide a
high-level view of systems integration that will cut across traditional
operating boundaries and business entities. The architecture is already
being used to bring a coherent approach to integrating and managing large
utility information technology and control systems.

The Energy Future Coalition has assembled a Smart Grid Working Group made
up of a broad range of stakeholders. With input from this group, the
Coalition is drafting a plan to develop a National Clean Energy Smart Grid
to unlock our renewable potential, to make our grid more efficient and
reliable, and to empower consumers to reduce their energy costs. The plan
calls for the U.S. to (1) Develop New Regional Transmission Plans to Bring
Renewable Power to Market, (2) Create New Incentives for Investments in
Smart Grid Technologies, and (3) Make Grid Security a Priority.

GridWise™ Alliance is a consortium of
public and private stakeholders who are aligned around a shared vision. A
vision of an electric system that integrates the infrastructure, processes,
devices, information and market structure so that energy can be generated,
distributed, and consumed more efficiently and cost effectively; thereby
achieving a more resilient, secure and reliable energy system. The Alliance
members recognize that emerging energy and information technologies have the
potential to radically improve the efficient use of the nation’s energy
system. The Alliance and its members advocate change locally, regionally,
and nationally to promote new policies and technology solutions that move us
closer to this vision.

In a Memorandum of Understanding signed
March 25, 2004, the GridWise™ Alliance and the U.S. Department of Energy’s
(DOE’s) Office of Electric Transmission and Distribution jointly expressed
their intention to establish a reliable and efficient electric system that
will: (1) Utilize information technologies to revolutionize energy systems
as they have revolutionized other aspects of U.S. business. (2) Create
value for all participants by developing and deploying technology solutions
that cross enterprise and regulatory boundaries. (3) Enhance security and
reliability through an information-rich power grid that is flexible and
adaptive. (4) Empower consumers to benefit from their participation in the
operation of the power grid. The MOU also calls for developing a joint
action plan for realizing this vision by establishing working groups, forums
and other vehicles that engage a broad array of stakeholders including the
utility industry, regulatory organizations, energy, telecommunications and
information technology vendors, consumer groups, government and
non-governmental organizations. It calls upon DOE to implement those actions
that it determines are prudent and consistent with its mission, scope, and
resources, and asks DOE and the Alliance to specify activities that will be
collaboratively pursued.

IEA's Implementing Agreement on Electricity
Networks Analysis, Research and Development (ENARD) is one of some forty
international IEA Implementing Agreement energy technology R&D programmes
operating within the IEA’s collaborative framework. ENARD is contributing
energetically to the knowledge and solutions essential for modern,
equitable, resilient electricity transmission and distribution (T&D)
networks. This interview with John Baker, Annex I Operating Agent, discusses
several issues and challenges related to implementing smarter electricity
grids in competitive markets.

It's likely that smart grids are coming, even without an aggressive shift
to renewable energy. On top of dealing with variable, dispersed inputs,
smart grids allow more efficient routing of power, with fewer idle or wasted
generators. Smart grids would, in principle, allow an overall lower level of
generation to support continued levels of use (or, more hopefully, a growing
level of use of in turn more efficient buildings and devices). Smart grids
are, in the end, a fundamental part of building post-oil, bright green
communities. As more renewable energy production is connected to the general
power grid, the more we will need smart systems managing the result.

In a project launched in 2006, researchers
have modified power-hungry appliances -- such as water heaters and dryers --
in hundreds of homes in Washington state to test how networked technology
can both save homeowners money on electricity bills and relieve the strain
on power grids. The experiments are done under an umbrella project called
GridWise, a DOE-supported initiative to modernize the country's power grids
by installing telecommunication, sensor, and computer technology into the
existing power infrastructure. By networking major appliances to the
Internet in order to monitor real-time electricity prices, and equipping
others with specialized chips to track grid stability, the researchers hope
to overhaul the antiquated electricity infrastructure and harness the power
of real-time tracking to optimize energy use.

In 2001 and 2003, Northwest energy and
economic development organizations joined in the Poised for Profit
partnerships to identify the region’s leading opportunities for developing
clean energy technology industries. This paper focuses on practical steps to
fully realize the potential of one of the top prospects uncovered by Poised
for Profit, smart energy, the convergence of information technology and
electric power. This paper is the outcome of a year-long collaborative
process that began in summer 2004 which engaged regional and national energy
and economic development experts in interviews, meetings and peer reviews.

U.S. Senator Maria Cantwell (D-WA) announced landmark legislation to
accelerate and encourage the development of a new nationwide intelligent
grid system. A smart grid system and broader use of new technologies will
improve energy efficiency, save consumers money on electricity bills, and
help in the drive for energy independence. Reducing peak demand has the
potential to save hundreds of billions of dollars in outage costs and in
reduced need for expensive, inefficient power sources. Pacific Northwest
National Laboratory calculates savings between $50 and $100 billion over the
next 20 years.

Smart Grid Newsletter (SGN) is the
insider's guide to this rapidly growing market. Sponsored by the Department
of Energy, the GridWise Alliance, Pacific Northwest National Laboratory and
other Smart Grid leaders, SGN serves the business, financial, utility, and
entrepreneurial communities. It is also widely read by researchers,
policymakers, government agencies, economic development groups, and others
who have a stake in the progress of the electric system.

NETL’s Modern Grid Strategy (MGS) seeks to accelerate the modernization of
our nation’s electricity grid. To accomplish this, MGS is fostering the
development of a common, national vision among grid stakeholders. MGS is
also working toward a framework that enables utilities, vendors, consumers,
researchers and other stakeholders to form partnerships and overcome
barriers. MGS also supports demonstrations of systems of key technologies
that can serve as the foundation for an integrated, modern power grid.

Between now and 2020, more than $200
billion will be spent to maintain and expand our electricity transmission
and distribution infrastructures, according to EIA. But without a modern
grid perspective much of this money will be spent based on 20th century
technology. This document describes the Modern Grid Initiative — its scope,
stakeholder roles and responsibilities, project plan and timeline. It begins
to explain why America needs to modernize its grid, as well as some of the
associated challenges and opportunities. It also offers readers an
opportunity to engage in the process of refining these concepts into a
national plan for modernizing the grid.

DOE conducted an independent
assessment of the U.S. electricity transmission system and found that our
U.S. transmission system facilitates wholesale electricity markets that
lower consumers’ electricity bills by nearly $13 billion annually. The
National Transmission Grid Study made clear that without dramatic
improvements and upgrades over the next decade our nation's transmission
system will fall short of the reliability standards our economy requires,
and will result in higher electricity costs to consumers. There is growing
evidence that the U.S. transmission system is in urgent need of
modernization. The system has become congested because growth in electricity
demand and investment in new generation facilities have not been matched by
investment in new transmission facilities. Transmission problems have been
compounded by the incomplete transition to fair and efficient competitive
wholesale electricity markets. Because the existing transmission system was
not designed to meet present demand, daily transmission constraints or
“bottlenecks” increase electricity costs to consumers and increase the risk
of blackouts.

On April 2-3, 2003, 65 senior executives
representing the electric utility industry, equipment manufacturers,
information technology providers, Federal and state government agencies,
interest groups, universities, and National Laboratories met to discuss the
future of North America’s electric system. The intent of the meeting was to
identify a national vision of the future electric system, covering the
entire value chain: generation, transmission, distribution, storage, and
end-use. The focus was on electric delivery – “the grid,” or the portion of
the electric infrastructure that lies between the central power plant and
the customer – as well as the regulatory framework that governs system
planning and market operations. This document describes the common
vision articulated at that meeting. DOE will use this vision to help
implement President Bush’s call for “…modernizing America’s electric
delivery system” and the 51 recommendations contained in the National
Transmission Grid Study.